RENTERS'
RIGHTS
& Landlord Transparency Practices in Philadelphia
By Olivia Scalora
Olivia Scalora is completing the Master of Urban Spatial Analytics program at Penn, where she is focusing on applying the powerful tools of data science to her passion in economic and community development. Her professional and academic background is in Architecture, and she is excited to be building both her design and technical skills to approach some of the more complex questions in housing policy and community planning.
The City of Philadelphia is not allocating enough resources to programs and policies that enforce landlord accountability, enabling problematic corporate landlord practices that overwhelmingly target low income and minority communities. This report attempts to describe the associations between the under allocation of resources to the Philadelphia License and Inspections Department, the unregulated practices within the rental housing market, and the rise of substandard rental conditions forced upon low-income Philadelphia residents. Finally, this report reviews some of the policies implemented to provide rental assistance and mitigate evictions in response to the pandemic.
A report released by Pew Charitable Trust and Reinvestment Fund in February 2021 found that just under half of Philadelphia households are rentals. [1] Homeownership has been on the decline since the Great Recession of 2008, which disproportionately impacted communities of color.[2] In response to the economic crisis, the federal government incentivized private equity firms and other large investors to buy foreclosed homes as an attempt to save the housing market, [3]perpetuating the transfer of wealth from Black and Brown communities to corporate landlords. Between 2011 and 2017, large investors across the country spent a combined $36 million on more than 200,000 homes. [4]
By definition, a corporate landlord is a landlord for whom real estate is their main profession– they usually own and operate rental properties through business entities. Two percent of Philadelphia landlords are corporate landlords who own 25 or more rental units.[5]These units account for over half of Philadelphia’s rental housing stock. Twenty-five percent of Philadelphia landlords own between 3 and 24 units, which accounts for 30 percent of the city’s rental units. [6] The remaining licensed landlords own one or two units and account for 18 percent of rental units. Property owners with one or two units may still be problematic but they don’t represent the issues associated with corporate landlords.
In 2020, the city removed the search by owner name feature from Open Data Philly, and prohibited third party researchers or web developers to create a search by property owner name feature for public use due to privacy concerns.[7] Enabling this feature would be a first step in granting the public the right to landlord transparency, however the issue runs a little deeper.
An additional challenge is that common practice for corporate landlords in Philadelphia is to create a shell company – typically an LLC with no identifying owner name attached – for each rental property they own.[8] This nesting of shell companies creates an anonymous web of ownership, making it very difficult to trace who the owners and investors are behind these properties. Given this phenomenon, a search by property name feature is the tip of the iceberg for landlord transparency tools.
In 2019, a researcher at Azavea published a report analyzing the association between corporate landlords and substandard housing conditions.[9] The report identifies a set of indicators of substandard housing which are as follows:
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Hazardous L&I code violations
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Eviction filings
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Potential illegal rental
The report states that 25 percent of non-owner-occupied properties are owned by business entities and found that corporate landlords are disproportionately responsible for substandard housing indicators. For every landlord-owned property in a census block group, there was a 0.86 increase in count of hazard code violations.[10]
[1] Hairder, Elinor and Octavia Howell, “Who Are Philadelphia’s Landlords?” The Pew Charitable Trusts and Reinvestment Fund. February 24, 2021.
[2] Anderson, Dana.”Minneapolis, Milwaukee & Salt Lake City Have the Lowest Black Homeownership Rates in the U.S., With Just One-Quarter of Black Families Owning Their Home,“ Redfin, October 19, 2020.
[3] Samuels, Alana, ”When Wall Street Is Your Landlord,“ The Atlantic, February 13, 2019
[4] Hairder, Elinor and Octavia Howell, “Who Are Philadelphia’s Landlords?,” The Pew Charitable Trusts and Reinvestment Fund, 2021
[5, 6] Hairder, Elinor and Octavia Howell, “Who Are Philadelphia’s Landlords?,” The Pew Charitable Trusts and Reinvestment Fund, 2021.
[7] Adelman, Jacob, ”You can’t look up Philly property owners by name anymore. City cites ‘security matters,’” The Inquirer, September 22, 2020.
[8] Cote, Noah, “Landlord Spotting in Philadelphia Property Data,” Towards Data Science.
[9] Walker, Fay, “Housing & Landlords: Using Open Data to Find Substandard Conditions” Azavea. September 26, 2019.
[10] Walker, Fay, “Housing & Landlords: Using Open Data to Find Substandard Conditions” Azavea. September 26, 2019.
Image: In many Census block groups with large percentages of Black and Latinx residents, there is a high prevalence of LLC-owned properties.
Source: Azavea and the Public Interest Law Center
CURRENT SYSTEMS OF LANDLORD ACCOUNTABILITY
Landlord fairness should be monitored by government entities, and there exists a number of ways that these entities can punish landlords who are non-compliant with the law. The Philadelphia Department of License and Inspections (L&I) is responsible for enforcing compliance with City Codes governing construction, new buildings, and existing structures.[11] This encapsulates property maintenance inspection, monitoring and demolishing of dangerous buildings, emergency response, addressing public complaints, license issuance, and more. If a tenant has an issue with poor maintenance, unsafe living conditions, or otherwise non-compliant landlords, they will file a complaint with L&I.[12]
Pew Charitable Trust and Reinvestment Fund released a report in November 2021 reviewing L&I code enforcement in Philly and compared it to practices in other cities. [13] The report revealed serious shortcomings in Philly resources and practices. For example, landlords are technically required to provide tenants with a certificate of rental suitability and the L&I guidebook for landlord and tenant rights and responsibilities. [14]This is unenforced and largely ignored by corporate landlords. Landlords are also required to obtain a rental license which costs $56/year [15] —and requires any open code violations to be resolved.
Using OPA data, PEW estimated that about 45 percent of rental properties (30 percent of rental units) were unlicensed in 2020. [16]Renting without a license is considered an illegal rental. For a landlord to file an eviction with the court, they must provide proof of rental license [17]—this then leads to illegal evictions which is difficult to collect data for and hard to measure.
L&I also provides rental licenses to landlords on landlord word that the unit is suitable by L&I standards. Current department practice is L&I will not inspect a rental property until a formal complaint is made by the tenant. L&I only inspects 7 percent of rental units every year—amounting to 20,160 units out of 288,000 [18]—and these numbers do not account for illegal rentals. Illegal rentals generally go unnoticed until a tenant files a formal complaint with L&I, in which case, the property owner is subject to as little as $300 daily fine until a rental license is obtained. [19]There are occasions in which tenants will not file a complaint in fear of retaliatory eviction by the landlord, [20] which is also illegal but unenforced and not often justly corrected in court.
The majority (82 percent) of Philadelphia’s rental housing stock is made up of single-family structures, creating a hurdle for inspection regulation efforts. [21]However, shortcomings in L&I standards and practices boil down to under-allocation of city resources. The current department budget accommodates only 45 property inspectors for the entire city, whose responsibilities extend far beyond rental property and inspections. [22] The Pew report stated that revenue from L&I would be sufficient to fund the staff and resources needed to conduct annual inspections of all rental properties, however the L&I department is not self-funded. [23] Revenue from violations and other fines is put back into the city’s general fund.
Image: Despite the vast majority of landlords owning only one to two units, Philadelphian renters are still more likely to be renting from a corporate landlord.
"This nesting of shell companies creates an anonymous web of ownership, making it very difficult to trace who the owners and investors are behind these properties. ”
[11] “What We Do,” Philadelphia Department of License and Inspection
[12] Code Enforcement”, Philadelphia Department of License and Inspections.Philadelphia Research and Policy Initiative, “Rental Code Enforcement in Philadelphia,” Pew Charitable Trusts, November 18, 2021
[13] Philadelphia Research and Policy Initiative, “Rental Code Enforcement in Philadelphia,” Pew Charitable Trusts, November 18, 2021
[14] City of Philadelphia Department of Licenses and Inspections, “Partners for Good Housing” (2019).
[15] City of Philadelphia, Permits, Violations and Licenses.
[16,17] Hairder, Elinor and Octavia Howell, “Who Are Philadelphia’s Landlords?,” The Pew Charitable Trusts and Reinvestment Fund, 2021.
[18] Allen, Taylor, “Why Philadelphia struggles to enforce rental codes,” Axios Philadelphia, November 19, 2021.
[19] Philadelphia Code, Chapter 1-111: Fraud or Deceit in Obtaining Licenses or Permits. Practices.
20] Philadelphia Code, Chapter 9-801: Landlord and Tenant- Legislative Findings.
[21] Philadelphia Research and Policy Initiative, “Rental Code Enforcement in Philadelphia,” Pew Charitable Trusts, November 18, 2021.
[22] Bond, Michelle, ” Philly L&I can’t fill open building and code inspector jobs. It’s not alone,” Philadelphia Inquirer, March 11, 2020.
[23] Hairder, Elinor and Octavia Howell, “Who Are Philadelphia’s Landlords?,” The Pew Charitable Trusts and Reinvestment Fund, 2021.
EXISTING PROGRAMS AND POLICIES
Preservation of the affordable housing stock is not a new conversation and it has elicited policy changes in the past. However in the first year of the COVID-19 pandemic, all levels of government demonstrated a recognition of urgency for renter protection resulting in widely effective programs benefitting low-income renters. Below are a few examples of the federal, state, and local response to the pandemic housing crisis:
LOCAL LEVEL:RIGHT TO COUNSEL
In 2019, Philadelphia City Council passed a renter’s right to counsel, guaranteeing all low-income renters access to an attorney to fight their eviction. According to the National Coalition for a Civil Right to Counsel, “unrepresented parties operate on an uneven playing field, with 80 to 85 percent of landlords having legal representation in Philadelphia landlord-tenant court while only 5-8 percent of tenants have such representation.”[24] Providing low-income tenants facing an eviction with an attorney in court increases the chance of a just outcome.[25] Most recently, the City of Philadelphia has invested $3 million in the Eviction Prevention Project, which will be carrying out the right to counsel for tenants facing eviction.[26]
THE EVICTION DIVERSION PROGRAM
The Eviction Diversion Program was the city’s direct response to the COVID-19 pandemic, enabled by the Pennsylvania Supreme Court, as an effort to minimize evictions during an especially precarious economic period. Landlords are required to apply for rental assistance and participate in the mediation process with the tenant before they can file an eviction due to lack of rent payment. The process includes assigning a housing counselor to the tenants to help with rental assistance applications and resolve any other issues. [27] This program was highly successful as proven by the dramatic drop in eviction counts from an average of 20,000 per year to under 5,000 in 2020.[28] The time-limited order for this program was extended by the PA Supreme Court twice, and the program is currently under consideration for legislation that would extend it another year. While the program model is original to Philadelphia, the funds are federal, and continuation of the Eviction Diversion Program is dependent on the US Treasury.
FEDERAL LEVEL:RENTAL ASSISTANCE PROGRAM
The Federal CARES act provided the City of Philadelphia with $39.4 million in funds via the federal Coronavirus Relief Funds to create PHLRentAssist in response to the initial economic hardships of the ongoing COVID-19 pandemic. The funds were distributed to a total of 14,000 households across two phases, initially requiring both eligible tenants and their landlords to apply for assistance.[29] An additional $30 million provided 4,000 renters with six months of rent for those who were eligible to apply for phase 2 but had uncooperative landlords. [30]
CORPORATE TRANSPARENCY ACT OF 2019
In October 2019, congress passed the Corporate Transparency Act which requires new and existing corporations and LLCs to provide information about their beneficial owners. A beneficial owner is defined as an individual who exercises substantial control over a corporation or limited liability company, owns 25 percent or more of the interest in a corporation or limited liability company, or receives substantial economic benefits from the assets of a corporation or limited liability company. [31]This bill is a critical step in seeking accountability of corporate landlords who operate through business entities, however it does not require public disclosure of business owner information.
This is not an exhaustive list of the efforts made by government entities to protect tenant rights and minimize evictions. Though these programs are effective and critical for protecting renters’ rights and reducing evictions, they are reactive as opposed to proactive. Until policies are made to take a more targeted approach at corporate landlords, low-income tenants will be subject to substandard housing conditions, illegal and unjust evictions as well as other dangerous situations. Landlord accountability must be obtained through actions that promote transparency and appropriately allocate resources.
